When Ciamac C. Moallemi hears people conflating emerging blockchain technologies with crypto currencies and the collapse of FTX, he suspects they are missing the bigger picture—and likely also missing out on opportunities.
That’s because when Moallemi, the William von Mueffling Professor of Business in the Decision, Risk, and Operations Division of Columbia Business School, considers the latest developments in blockchain technologies, he can’t help but contrast the spirit of experimentation he sees in the field with the comparative stasis of traditional financial markets.
“There are a lot of ideas that people have tried in crypto because it’s unregulated—and because you can try them. Some of them have been bad, but some of them have worked quite well,” says Moallemi. “Fundamentally, block- chain might enable new things that are simply not possible in the traditional environment.”
It’s this promise of new innovations, and the potential to solve financial problems more efficiently, that is at the core of the new Briger Family Digital Finance Lab, one of a collection of labs being launched as part of the School's Digital Future Initiative.
Overseen by Moallemi, the lab focuses on decentralized finance and its role in transforming how financial markets function within new structures like automated collateralized lending pools and automated market makers. Included in the lab’s purview will be the underlying economics of blockchains, decentralized market microstructure, and mechanisms for decentralized organization and governance.
In addition to supporting research in the area of digital finance, the lab will seek to bridge the gap between industry practitioners and academics, and bring together academics from a variety of areas (operations, economics, computer science) to expose students to these new technologies and their applications.
The lab’s team will investigate questions ranging from “How do we match people when they want to trade or lend?” to “What are the types of products we can offer investors?” For instance, Moallemi sees the development of perpetual futures in crypto (futures contracts that have no expiry date, unlike traditional futures contracts) as a good example of how blockchain technology permits the development of new products.
“The goal of this Digital Finance Lab is first and foremost to explore some of those ideas,” Moallemi said. “But then also, by doing our own research and by interacting with practitioners, we bring those ideas back into the curriculum.”
Fostering an ongoing dialogue between researchers, practitioners, and students is a key part of the Digital Finance Lab—and one Moallemi sees as essential to both teaching and informing new research. Joint projects between academics and practitioners can identify the capabilities blockchain offers as well as the challenges. Moaellemi also sees an opportunity to address further research to make systems work more efficiently. The overarching question is: How can blockchain help process more transactions to help reduce costs and increase efficiency?
Conferences are one way the lab will facilitate collaboration and bring the newest ideas to campus. The inaugural Columbia CryptoEconomics Workshop, co-sponsored by the Ethereum Foundation, was held this past fall. At the event, professors, alumni, and practitioners in the field explored issues related to economics, incentives, and blockchain technology. And the new Digital Finance Seminar Series brings in top researchers from academia and industry across disciplines to discuss the latest developments in the field.
The ability of both the lab and the planned events to move the conversation forward in the field will be a benefit to all involved, says Moallemi.
“As academics, we’re really good at building models and understanding things if we know the problems,” he says. “But the industry practitioners, they’re the ones who know the problems. So a big role of the center is to connect these two sides.”